In the past two months, the cost of transporting goods from China to Europe has more than quadrupled, hitting a record high, due to the pandemic disrupting global trade and the shortage of empty containers.
Data from shippers and importers show that the freight for transporting a 40-foot container from Asia to Northern Europe has risen from approximately US$2,000 in November last year to more than US$9,000.
Lars Jensen, CEO of maritime consulting company SeaIntelligence, said that the reason for the increase in freight rates is the market's competition for limited resources-containers.
In the first half of 2020, due to a sudden slowdown in global trade due to the epidemic blockade, shipping companies have suspended large-scale shipping and thousands of empty containers are stranded in Europe and the United States. In the second half of the year, when Western countries' demand for Asian-made goods rebounded, competition among shippers for available containers pushed up freight rates.
John Butler, Chairman of the World Shipping Council, said, "The freight volume has dropped from a sharp decline to soaring to the highest level in history, and the effective handling capacity of the terminal has exceeded the upper limit."
He added that the congestion in the port has caused freight rates to rise, and shipping companies charge additional fees to compensate for the longer waiting time.
British freight forwarding company Edge Worldwide CEO Philip Edge said that some shipping companies charge US$12,000 per container, much higher than the US$2,000 in October last year.
The British Household Electrical Appliance Manufacturers Association stated in a statement, “According to member companies’ disclosures, shipping costs have increased by more than 300% since 2020. Especially for some commodities, the increase in shipping costs has exceeded the net increase Profit. Therefore, these costs will have to be passed on to the end user."
The owner of a leisure goods importer in Manchester said that the shortage of containers is having a “huge impact” on his business, and some orders placed in November are still waiting to be shipped. "The question is, is it to pay $12,000 now and pass the cost on to the customer, or to wait at the risk of exhausting inventory?"
Economists say that such interruptions and delays are beginning to affect global supply chains. Neil Shearing, chief economist at Capital Economics, said that "transportation pressure is accumulating and may increase further."
A recent survey by IHS Markit found that in December last year, the delivery time of manufacturing suppliers in the Eurozone reached the worst level since the peak of the pandemic lockdown in April. Shipping delays and general commodity shortages were "widely mentioned" by suppliers. .
The companies surveyed stated that they are consuming inventory of raw materials and semi-finished products, resulting in a decline in inventory.
Bert Colijn, senior economist at ING, said that "supply shortages and rising freight rates may slightly curb trade growth."
On the occasion of the Chinese New Year in February, the Asian manufacturing industry slowed down. Shipping companies hope to use this time to solve the problem of increasing backlog orders, which will temporarily cool freight rates.
However, BIMCO chief shipping analyst Peter Sand said that the shortage of containers may continue for a long time in 2021. Although the shipping company has ordered new containers, in his opinion, such a move is "too small and too late."
Lars Jensen also believes that although freight rates may drop slightly, "there are still a lot of goods waiting to be transported."
John Butler pointed out that only when epidemic-related restrictions are reduced and people have more diverse service choices, the pressure on the maritime supply chain can be alleviated, but no one can say when it can be improved.
